Cuts are about ideology, not the deficit

Cuts are about ideology, not the deficit

By Simon Barrow

24 Mar 2011

As a variety of commentators have suggested, the spring 2011 budget has essentially been window dressing. The scope of the government’s fiscal policy was set in Mr Osborne’s emergency budget in June 2010, and in October’s four-year public spending review. “The big news is the old news”, as Paul Johnson of the Institute for Fiscal Studies put it in the IFS response.

What was announced on 23 March 2011 has done nothing substantial to boost productivity and investment, nothing significant to mitigate cuts that hit the most vulnerable, and nothing agenda-shifting on environment or planning. But it does appease transnational corporations (by “reforming the taxation of foreign profits”), and it offers useful cover for the central deceit of the government’s economic strategy – which is that massive cuts in the public sector and in the local and national state are “unavoidable” and “necessary” to eliminate Britain’s massive deficit.

In reality, the £81+ billion cuts over four years initiated by the Comprehensive Spending Review (the estimates are likely to be revised upwards in the coming months) are a small proportion of the UK’s total debt mountain, which, comparably, is around £894 billion. The Independent newspaper’s front page graphic in relation to the CSR last year (click on thumbnail or see file below) put the situation across very well – not in order to minimise the significance of the cuts themselves (those will hit the least well-off and the least protected the most, while causing little concern to the 18 millionaires in Cameron and Clegg’s cabinet) - but in order to illustrate that these measures make little serious impact if the issue really is total national debt - the substantial majority of which is private and financial services debt, not public debt (the only kind which the government gets money back on).

Indeed, the ‘cure’ is not working. The GDP has sunk by seven per cent compared to 2005/6 as a result of the crash. Inflation was up to 4.4 per cent in February 2011. The Office for Budget Responsibility has downgraded its official growth forecast for 2011 to 1.7 per cent, from the 2.1 per cent predicted in November 2010. Commodity prices are going up. Cuts have been accelerated and frontloaded to an average 15.2 per cent. And unemployment has risen to eight per cent, a 17-year high of more than 2.5 million (up from 1.6 milion in 2008) – despite various wheezes to get the jobless off the register (which leads some analysts to suggest that it is actually over 3 million). So there is pain, but not gain.

The debt mountain should not be denied, or misused as UK government apologists are at present. Instead it has to be addressed in four interrelated ways – mutual restructuring, sustainable long-term, carbon-responsible investment and productivity (along the lines put forward by the ‘Green New Deal’ economists), and concerted local and global action. The latter involves economic stimulation rather than depressing markets – as Nobel Prize-winning economist Joseph Stiglitz, and others, have argued. It also requires wholesale reform of banking and international finance. A transaction tax, certainly, and in all probability a new Bretton Woods agreement (though with quite different assumptions and outcomes from the previous one) for the C21st. Fair-market economics and socially- and environmentally-driven pacts/rules are the names of the new game.

In Britain alone, the sums involved in the spending cuts being implemented by the coalition government - many of which reduce national income too, or worsen short-term problems (health or youth services, say) at the expense of creating longer term endemic ones - amount to less than the money that could be raised by just three measures: tax reform to stop the leaching away of billions of pounds from the wealthiest companies and individuals, an electronic levy on speculative financial activity at a rate of 10p in £1,000, and cutting the redundant Trident nuclear submarine programme.

In the context of these alternative proposals, ‘fair’ means ‘just’, for both people and planet. Corporatism and neoliberal ‘free’ markets (in fact they’re not ‘free’ – they cost the earth and punish the weakest) are central to the regime that must pass away, because they are the cause of our problems, not their resolution.

That, of course, is inimical to the ideology of George Osborne. Which is where the public spending cuts come in again. When last year the IFS called the government’s plans “regressive” and other critics accused the coalition of pursuing an “ideological assault on the state”, deputy PM Nick Clegg said this was all “nonsense.” Sadly, it isn’t. As a new report from Ekklesia on the ‘Big Society’ will illustrate shortly, what the government is embarked upon is a major de-layering of public institutions, a fundamental (but piecemeal and wholly under-resourced) economic shift for civil society from state to market, and a revaluation of public good towards charity rather than justice.

In this sense, whatever positive features it may seek to embody and embrace, ‘Big Society’ is essentially traditional conservative ‘small government’ ideology coated with ‘compassionate conservatism’ (one of a range of imports from the US Republican right) and dressed up as ‘responsible housekeeping’ (deficit reduction). It espouses civil action and civic responsibility – but refuses to invest in it, to ensure dependable and even provision of services, to face the true cost of capacity-building and maintenance, to provide infrastructure, or to acknowledge the inherent instability of reliance on ‘voluntary capital’.

Instead, by removing public funding and institutions, and by offering no alternative framework beyond the rhetoric of ‘emergence’ and ‘responsibility’, the government says it is ‘creating space’ which others – those with resources or those who can grab them – will ‘fill in’, somehow.

The (non) operative word is ‘somehow’. The gaps between what is being taken away and what is needed in its place are where the answers are at their thinnest, if they are there at all. How can third sector bodies deliver public services when the largest children’s charity in Britain is no bigger than a single local authority? What will a ‘self-financing local authority’ (Communities Secretary and ‘localism’ guru Eric Pickles) look like in a depressed area? How can a £5 billion deficit in voluntary sector funding be resolved by a £100 million transitional fund, £300 million of which are repayable ‘Big Society bank’ loans, and static corporate giving? All this is immensely problematic.

The same classic alliance of High Tory entrepreneurial individualism and romantic bourgeois philanthropy targeted on the feckless via a ‘sense of duty’ on the part of ‘haves’, is at play here. Some councils are embracing it enthusiastically, too. In Cornwall and Dorset, for example, where cuts are going ahead despite increases in central social allocation – in one case to redirect money to roads. Or in Barnet, where council leader Brian Coleman came to fame for proposing “no-frills” public services. He then announced £29 million-worth of cuts (while keeping his own £100,000 salary). The council, however, is still getting its full government allocation for Sure Start. It just won’t be spending any of it on children’s centres.

Yet more evidence that cuts are not to do with deficits. If anything, they’re to do with revenge against the post-war welfare settlement – which may have its problems, but not of the kind that requires it to be swept away. Likewise, David Cameron speaks of ‘broken Britain’. But his government is contributing in no small way to the ongoing process of fracture.

It is time for churches and faith bodies, community groups, trade unions, policy makers, advocacy organisations, social enterprises, co-ops, and thoughtful actors within the fabric of still-existing civic state, to rethink, resist and reframe.